Time Warner’s Losses Grow Due to Cable TV Costs

Time Warner Inc.’s loss widened in the second quarter as residual costs from recent cable TV acquisitions overwhelmed higher profit from its media and entertainment properties.

The media and entertainment company said Tuesday that its loss from operations grew to $31 million, or 26 cents a share, from $8 million, or 3 cents, in the year-earlier period. The results include preferred dividend payments.

After a charge of $9 million, or 2 cents a share, from the early retirement of debt, Time Warner had a final loss of $40 million, or 28 cents, in the most recent quarter.

But Wall Street had expected an even steeper loss of 29 cents a share, according to a survey of analysts,

“The businesses look like they are in spectacular shape,” said Larry Haverty, an analyst with State Street Research, which owned 2 million shares at the end of March.

Time Warner’s filmed entertainment business was the company’s best performer in the April-June quarter due to the box-office success of the feature films “Twister” and “Eraser.”

Its publishing, HBO pay-cable services and cable system operations units also posted profit gains for the quarter, and its recorded music business matched last year’s performance.

But the New York-based company’s depreciation and amortization costs resulting from more recent cable TV system acquisitions continue to leave the company short of profitability. Time Warner is also carrying a $15-billion debt, much of it resulting from Time Inc.’s 1989 purchase of Warner Communications Inc.

Revenue from its own operations as well as its majority-controlled Time Warner Entertainment venture rose 9.4%, to $4.75 billion from $4.34 billion a year ago.

The company said combined earnings before interest, taxes, depreciation and amortization rose 20%, to $1.03 billion from $860 million a year earlier.

Time Warner and other debt-laden media companies encourage analysts and investors to follow this measurement as an indication of how they are running their business.

On that basis, profit rose 21% in filmed entertainment, 16% at HBO, 15% in publishing and 13% from cable TV systems.

The music division was flat as gains in the domestic operations were offset by lower results from international music and direct marketing.

The WB Network had a loss of $12 million for the quarter, the same as a year ago. The television network expanded from one to two nights of programming last fall.